The world has never been more connected than it is today – communications, technologies, years of expansive trade, and supportive institutions have expanded the boundaries of commerce. Investment portfolios have evolved to mirror this interconnectedness. With fewer barriers to the flow of capital, investors diversified portfolios in search of growth and expanded their operations to source investment opportunities in fast growing markets.

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We are now at a moment when global rivalry is running hot and support for globalization is cooling. The resulting opportunity set for investors is shrinking as global security and economic alliances rewire. This rewiring of globalization requires specific attention to strategy, governance, and integrated processes to bring geopolitical views into investment decision making. Doing this effectively requires deep integration between geopolitical and traditional investment analysis.

By focusing on the long term, investors improve their ability to withstand geopolitical shocks and disruptions. At first, it’s the jolt of adjusting to a new reality: the ripple effects of war, terrorist attacks, abrupt policy changes. But with the right amount of preparedness, investors can learn to be proactive instead of reactive in a new era of geopolitical risk and uncertainty. National interest may come as an unwelcome addition to investment mandates, but it’s becoming increasingly difficult to avoid using a national security lens when making investment decisions.

Executives and investment committees can take several steps to improve their organization’s and portfolio’s resilience to geopolitical risks:

Govern: We propose the Top Ten Questions for committees to refer to, organized by portfolio, reputational, and organizational risks. A Review Guide for Investors delves further into these three critical areas to help identify risks and opportunities.

Take concrete action: We propose actions that executives and committees can take now to realize opportunity and improve resilience. These include practices for filtering signal from noise, right-sizing exposures, engaging with governments, and strategic foresight.

Engage with portfolio companies: Re-underwrite the investment thesis for investing in a company, given geopolitical headwinds. What are the company’s competitive advantages, and how are they dependent on a global footprint? Long-term outcomes may not be clear, but a company’s long-term objectives should be.

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Recap: 2024 Davos CEO Roundtable

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